Turkish economic growth dips as lira crisis darkens outlook

Finance Minister Berat Albayrak said, growth was driven by domestic demand despite a moderate slowdown in consumption and investments in the second quarter but the slowdown will become more visible from the third quarter. (Getty Images)
Updated 10 September 2018
0

Turkish economic growth dips as lira crisis darkens outlook

  • Tayyip Erdogan has overseen strong growth during his 15 years in power but the economy is now facing challenges after a sharp decline in the lira
  • The government has been working on stimulus measures to stave off the expected slowdown in the coming quarters

ISTANBUL: Turkish economic growth slowed to 5.2 percent year-on-year in the second quarter, data showed on Monday, in what officials described as an economic rebalancing before an expected second-half slowdown as Turkey grapples with a currency crisis.
President Tayyip Erdogan has overseen strong growth during his 15 years in power but the economy is now facing challenges after a sharp decline in the lira, triggered partly by concerns about his influence over monetary policy.
In a Reuters poll, the economy had been expected to grow 5.3 percent in the first quarter. The lira firmed to 6.4550 against the dollar after the data from 6.4850 beforehand.
Second quarter gross domestic product (GDP) expanded a seasonally and calendar adjusted 0.9 percent from the previous quarter, data from the Turkish Statistical Institute showed. Last year the economy grew 7.4 percent.
Growth was driven by domestic demand despite a moderate slowdown in consumption and investments in the second quarter but the slowdown will become more visible from the third quarter, said Finance Minister Berat Albayrak.
Rabobank emerging markets forex strategist Piotr Matys said that, given concerns over the economy overheating, the slowdown from 7.3 percent in the first quarter could be seen as encouraging.
“The Turkish economy is widely expected to lose even more momentum in the coming quarters as a result of significant lira depreciation,” he said, adding that attention was focused on the central bank’s rate-setting meeting on Thursday.
Investors expect the central bank to raise interest rates, but the size of the hike will be crucial, Matys added. The bank left rates on hold at its last meeting in July, defying expectations of a hike.
Data last week showed inflation surged to 17.9 percent year-on-year in August, its highest level since late 2003, prompting the central bank to signal it would take action against “significant risks” to price stability.
In the second quarter, the agricultural sector shrank 1.5 percent year-on-year while the industry sector grew 4.3 percent, the construction sector grew 0.8 percent and services expanded 8 percent.
According to a Reuters poll, the economy is expected to grow 3.3 percent in the year as a whole.
The government has been working on stimulus measures to stave off the expected slowdown in the coming quarters. Erdogan, a self-described “enemy of interest rates,” has pushed banks to lend more to boost private spending.
His demands for lower interest rates have fueled concerns that the central bank lacks independence. The lira has tumbled 41 percent against the dollar this year in a slide exacerbated by a bitter diplomatic row with the US.
Officials have said they expect a contraction of the economy in the third quarter and full-year growth of around four percent — below a 5.5 percent government target.


US intelligence says Huawei funded by Chinese state security: report

Updated 20 April 2019
0

US intelligence says Huawei funded by Chinese state security: report

  • The accusation comes at a time of trade tensions between Washington and Beijing
  • Huawei dismissed the allegations

US intelligence has accused Huawei Technologies of being funded by Chinese state security, The Times said on Saturday, adding to the list of allegations faced by the Chinese technology company in the West.
The CIA accused Huawei of receiving funding from China’s National Security Commission, the People’s Liberation Army and a third branch of the Chinese state intelligence network, the British newspaper reported, citing a source.
Earlier this year, US intelligence shared its claims with other members of the Five Eyes intelligence-sharing group, which includes Britain, Australia, Canada and New Zealand, according to the report.
Huawei dismissed the allegations in a statement cited by the newspaper.
“Huawei does not comment on unsubstantiated allegations backed up by zero evidence from anonymous sources,” a Huawei representative told The Times.
The company, the CIA and Chinese state security agencies did not respond immediately to requests for comment.
The accusation comes at a time of trade tensions between Washington and Beijing and amid concerns in the United States that Huawei’s equipment could be used for espionage. The company has said the concerns are unfounded.
Authorities in the United States are probing Huawei for alleged sanctions violations.
Meng Wanzhou, Huawei’s chief financial officer and daughter of its founder, Ren Zhengfei, was arrested in Canada in December at the request of the United States on charges of bank and wire fraud in violation of US sanctions against Iran.
She denies wrongdoing and her father has previously said the arrest was “politically motivated.”
Amid such charges, top educational institutions in the West have recently severed ties with Huawei to avoid losing federal funding.
Another Chinese technology company, ZTE Corp. , has also been at the center of similar controversies in the United States.
US sanctions forced ZTE to stop most business between April and July last year after Commerce Department officials said it broke a pact and was caught illegally shipping US-origin goods to Iran and North Korea. The sanctions were lifted after ZTE paid $1.4 billion in penalties.
Reuters reported earlier this week that the United States will push its allies at a meeting in Prague next month to adopt shared security and policy measures that will make it more difficult for Huawei to dominate 5G telecommunications networks.